Betting on Disruption: The Rise of Unexpected Pairings in RetailMarch 4, 2018
The pressure to differentiate in today’s retail environment is like a tiger circling around retailers and brands, ready to pounce at the first sign of weakness. Retail players have responded with a number of strategies, from new product development to new marketing campaigns to new formats. Some of the most interesting steps recently taken toward innovation have also resulted in some of the most unexpected pairings—think a convenience store developing a private brand makeup line or a discount retailer launching a private label clothing line designed by a supermodel.
What makes such pairings interesting is not only the fact that they are unexpected, but also that they aim to disrupt usual norms. Like all disruptors, there’s an inherent risk involved. Are these attempts at innovation simply headline-grabbers? Or do they have the power to actually change consumer perceptions and buying behavior? How can retailers and brands decide if it’s worth the risk? Retail News Insider set out to investigate the growing phenomenon and find the answers to these questions and more.
Researching examples of recent product launches and collaborations, it becomes clear that some unexpected moves are clearly more suited to driving marketing goals versus generating new product lines. Case in point: Stove Top’s “Thanksgiving Dinner Pants”—stuffing-inspired stretchy pants designed to let you eat as much as you like without having to pop a button. Despite having a popular following on social media, they were no longer available for purchase as of this publication.
But on the flip side of the coin, we also found a number of more intentional and strategic moves. There were three that stood out as warranting closer consideration:
7-Eleven + Private Brand Beauty
In late 2017, convenience chain 7-Eleven announced it was launching its own private brand cosmetics line called Simply Me Beauty™. Touted by the retailer as an affordable makeup line created for busy Millennials looking for cosmetics must-haves when they’re on-the-go, the line features a range of items from blushers and eye shadows to brushes and nail polish remover.
Though the pairing has raised some eyebrows, particularly on beauty blogs, Jack Stout, 7‑Eleven Senior Vice President of Merchandising, was quoted in a company press release as saying, “convenience isn’t always just about a quick stop for something to eat and drink. 7‑Eleven tries to offer our customers solutions for lots of different needs. We believe that for many, this top quality line of cosmetics and cosmetic accessories can become regular purchases in addition to fill-in stops.”
Nicole Peranick, Senior Director of Thought Leadership for Daymon, believes the new line “could be intended as a way for 7-Eleven to compete with drugstore chains, who have gotten more aggressive in recent years with on-the-go foods, and fresh and frozen items.” Using their own private brand to innovate in white space categories could be an effective way for 7-Eleven to drive margin, she explains.
Lidl + Heidi Klum
The collaboration between discount grocer Lidl and fashion model Heidi Klum is another example that seems, on the surface, to blur the lines between channels. For the 2017 holiday season, the retailer introduced a capsule collection of private brand clothing designed by Klum. While Lidl has long carried fashion basics under its private brand Esmera line in European stores, this collaboration presented more fashion-forward, special occasion-worthy choices and was one of the first collections offered in its new U.S. stores.
U.S. shoppers may not be used to seeing or shopping for clothing at a grocery store, but Peranick says that this collaboration is one more example of how “discounters like Lidl and Aldi are changing the game in terms of what private brand means and what they deliver on.”
She goes on to note that the partnership with Klum, a well-known name in fashion, was a particularly smart way to help lend credibility to the venture. “Partnering with a person or brand that already has credentials in the space is an effective way to mitigate the risks of foraying into white space categories,” she explains.
“Any time a private brand gets into a new area, they have two major challenges to overcome: ensuring they have credibility to compete with national brands and getting the word out on a big enough scale. A strategic partnership helps both of these,” agrees Dave Harvey, Vice President of Thought Leadership for Daymon. Viewed in that light, it seems the approach taken for this pairing might be both strategic innovation and marketing move all rolled into one.
Amazon + Healthcare
In August of 2017, Amazon quietly rolled out an exclusive line of over-the-counter medications under the name Basic Care®, available only on its U.S. website. Then, in January, the online retailer announced it was partnering with financial services firm JP Morgan and holding company Berkshire Hathaway to form a new healthcare company. In a press release, the partners stated that the initial focus of this new venture would be on helping to reduce healthcare costs and improving outcomes for the three companies’ U.S. employees.
But John O’Leary, Analyst for Planet Retail RNG, says that “despite whatever public statements are put out, you can’t see Amazon entering any new vertical or new industry and not think they’re not thinking about doing it in a more mass consumer way.”
He believes the partnership likely represents an attempt by Amazon to figure out how it can interact with the healthcare industry on a smaller scale before considering broader implications for retail in the future. “You can look at other industries where they started with just a few companies, like Amazon’s cloud computing services, which were originally used only for Amazon businesses, but then launched to more companies and is now a huge source of business for Amazon.”
This venture is still in the very early stages, so it remains to be seen what it will become. But should Amazon try to use its learnings from this partnership to roll out a more mainstream offering, O’Leary suspects it may face challenges, particularly in winning over consumers. “Healthcare is something that for a lot of consumers can be very person-to-person. Traditional players have the advantage of having distributed store networks that they can leverage as an environment for a consumer to come in and speak with a real person about what to buy or [visit an in-store] clinic to get services,” he explains.
“It may be difficult for Amazon [as an online retailer] to build healthcare into their brand, but I don’t think it’s impossible,” continues O’Leary. “There are positive aspects, such as their ability to fulfill orders quickly and their scale to impact prices. It’s [going to be about] overcoming consumers’ association with going to Amazon to fill their pantry versus their healthcare needs.”
Understanding the Trend
As these examples reveal, one of the main factors driving the trend of unexpected pairings is increased competition. “The retail landscape is more competitive than ever before. Shopper expectations are higher than ever before. So, you have to think outside the box to bring new innovation and generate traffic,” says Peranick.
O’Leary agrees, noting, “I think there’s a level of what we call co-opetition. Across retailers, suppliers, distributers, the entire retail value chain—a lot of players that would be rivals are finding strange bedfellows as they try to align themselves against Amazon…. There are some risks being taken competitively to avoid becoming obsolete.”
In the private brand space in particular, Harvey adds that we may be likely to see even more of this type of innovation as “retailers start to think about their private brands as true ‘brands.’ They’re hiring classically trained marketers and starting to think more like national brands, so more creative partnerships may come to be.”
So how can retailers find the line between unexpected-but-good and unexpected-and-unwanted? It all comes down to knowing your customer and your brand.
“The trick is [figuring out] what catches shoppers’ attention—what’s appealing and interesting and a little bit of a changeup,” says Jim Holbrook, CEO of Daymon. “A lot of retailers’ private brands have a lot of equity and can travel pretty far. The key is to travel far in one direction and not get too diffused, spread out or watered down. It might be easy, convenient, appealing and enticing to spread the business out where it doesn’t belong because there’s margin to be made… but the smart retailers know where their brand can go.”
Peranick recommends retailers look to adjacent white spaces for innovation opportunities—and get consumer buy-in from the start. “Engage them in co-creation, solicit feedback on ideas, get their input on assortment—that all goes a long way toward mitigating risks for new initiatives,” she says.
“Creating a local connection is also an effective strategy, especially for regional retailers and their private brands,” adds Harvey. “Partnerships and unique products that appeal to the local consumer can help them differentiate [from national retailers and brands] as well.”
While creating unexpected and outside-the-box offerings undoubtedly carries risk, retailers must keep in mind that there is also very real risk in doing nothing. “Rethinking what a retailer should be is very much a part of a lot of these strategies,” says O’Leary. “Focusing solely on what we’ve done traditionally has led to demise…. The idea of what a retailer will be in the future is very different from what it is today.”